Dalmia Bharat shares downgraded, price targets cut after Q2 results; Details here

Shares of Dalmia Bharat Ltd. will be in focus on Tuesday, October 27, after the cement maker reported a weak set of results for the September quarter of FY27, with higher costs and subdued demand weighing on profitability. The company also reported a net loss, partly due to exceptional charges related to asset impairment and an employee separation scheme.

Revenue for the quarter stood at ₹3,563 crore, below the analyst poll estimate of ₹3,646 crore. Sales volumes came in at 7.1 million tonnes, against expectations of 7.3 million tonnes.

EBITDA declined amid higher costs, coming in at ₹493 crore compared with the poll estimate of ₹552 crore. The EBITDA margin stood at 13.84%, below expectations of 15.14%, while EBITDA per tonne was ₹698 against the estimated ₹752.

The company reported a net loss of ₹208 crore, compared with the poll estimate of a net profit of ₹75 crore.

What weighed on Dalmia Bharat's Q2 performance?

Dalmia Bharat's operating performance was affected by subdued demand in its eastern and north-eastern markets, which weighed on volume growth. Net sales realisation (NSR) increased 1% year on year but declined 1% sequentially.

Higher fuel prices pushed up power and fuel costs, adding to the pressure on profitability. The integration of central assets also weighed on the quarter's performance.

The company recognised an exceptional impairment loss of ₹282 crore on certain assets, including three captive power plants and one brand, following an assessment of their recoverable values. It also recorded a one-time charge of ₹57 crore related to a separation scheme for eligible employees at select units.

How brokerages reacted to Dalmia Bharat Q2 results

HSBC downgraded Dalmia Bharat to 'Hold' from its earlier rating and reduced its price target to ₹1,820. The brokerage cited muted volume growth, a sharp increase in costs and asset impairment charges as key factors behind the quarterly net loss.

HSBC also expects the acquired assets to remain a drag on performance in the December quarter, with the company targeting breakeven by the end of FY27.

Morgan Stanley maintained its 'Underweight' rating on Dalmia Bharat, with a price target of ₹1,640, describing the quarterly performance as weak.

The brokerage highlighted subdued volumes, partly due to seasonality, and elevated costs. While operating leverage could support profitability in the second half of the financial year, variable costs are expected to remain high, partly offsetting the benefit of recent price increases.

Morgan Stanley said it continues to favour a cautious stance given the company's weak profitability.

Citi maintained its 'Buy' rating on Dalmia Bharat but cut its price target to ₹1,900. The brokerage said EBITDA declined 29% year on year, as a 9% increase in costs offset the benefits of volume growth and a 1% improvement in realisations.

Adjusted EBITDA per tonne stood at ₹694, compared with ₹1,055 in the June quarter and ₹1,010 a year earlier. Excluding central assets, EBITDA per tonne was ₹746.

Citi attributed the sequential decline in EBITDA per tonne to lower realisations, higher costs, weaker volumes and losses related to JPA. It also noted that net debt-to-EBITDA increased to 2 times from 1.5 times in the previous quarter.

While the brokerage sees limited visibility on cost improvement in the near term, it believes medium-term progress on premiumisation and cost efficiencies could support returns. Better operating leverage, a favourable product mix and higher prices could also help improve EBITDA per tonne over time.

CLSA retained its 'Outperform' rating on Dalmia Bharat but lowered its price target to ₹2,000. The brokerage said the results were significantly below expectations and weaker than those of peers, citing an adverse regional mix, market share losses, losses at acquired assets and higher cost pressures.

CLSA expects near-term profitability to improve, supported by cement price increases, better fixed-cost absorption and the ramp-up of acquired assets. However, higher fuel costs could partly offset these gains.

Over the medium term, the brokerage said the company's ability to improve asset utilisation and deliver cost savings will be crucial. Although valuations appear undemanding, it cautioned that meaningful triggers for the stock may take time to materialise.

Jefferies retained its 'Buy' rating on Dalmia Bharat but reduced its price target to ₹2,125 after a weak September quarter, with EBITDA declining 29% year on year.

The brokerage attributed the performance to weakness in the eastern region, where volumes and pricing remained subdued, alongside higher costs. It expects industry-wide cement price increases to support a recovery in the second half, although losses related to JPA are likely to rise in the December quarter before easing.

Jefferies also lowered its EBITDA estimates by 7–11% to reflect near-term weakness. The brokerage flagged an unexpected management transition, with the chief marketing officer moving to an advisory role and the chief financial officer taking on a new sales and marketing responsibility.